Seizure of Cash and Silver Bars During GST Search Declared
Illegal: Delhi High Court Orders Release
Case
Summary
The Delhi High Court
addressed a critical issue under GST law—whether officers have the authority
under Section 67 of the Central Goods and Services Tax Act, 2017 (CGST Act) to
seize cash and valuable assets such as silver bars during a search when those
items are not directly linked to any taxable supply or confiscation
proceedings.
The Court concluded that
Section 67 empowers officers to seize goods liable to confiscation and documents/books/things
relevant to proceedings, but not to seize cash or assets simply on the basis
that they are “unaccounted wealth.” In the absence of any direct evidentiary
link between the seized assets and alleged GST violations—and since no
statutory notice within six months was issued in relation to them—the seizure
was held illegal. The Court ordered the immediate release of the currency and
silver bars.
Case Details
- Parties:
Deepak Khandelwal, Proprietor, M/s Shri Shyam Metal vs. Commissioner of
CGST, Delhi West & Anr.
- Court:
High Court of Delhi at New Delhi
- Case No.:
W.P.(C) 6739/2021
- Date of Judgment:
17 August 2023
Facts of
the Case
1. Business
Background:
o Petitioner
Deepak Khandelwal runs a sole proprietorship, Shri Shyam Metal, trading
in non-ferrous metals.
o He
is registered under GST with GSTIN 07AGCPK1126B2Z5.
2. Search
and Seizure:
o On
28 January 2020, GST officers conducted a search of the petitioner’s
residence under Section 67(2) of the CGST Act.
o Seizures
included:
§ Two
silver bars weighing 29.5 kg and 14.5 kg
§ ₹7,00,000
in cash
§ Several
mobile phones
§ Cheque
books, sale bill book, notebooks, and other documents.
3. Arrest
and Bail:
o On
29 January 2020, petitioner was arrested for alleged offences under Section
132(1)(i) of the CGST Act.
o He
was released on bail on 21 March 2020.
4. Tax
Proceedings:
o On
10 November 2020, the Delhi State GST Officer issued a Section 74 notice
demanding ₹24,20,900 (including ₹12,10,450 penalty).
o This
notice did not rely on any seized goods, cash, or documents.
o On
23 March 2021, petitioner requested release of seized items, citing lapse of
six months without any confiscation notice under Section 67(7).
o Authorities
did not return the items, prompting the writ petition.
Petitioner’s
Arguments
1. Lack
of Power to Seize Currency:
o “Goods”
under Section 2(52) excludes money and securities; hence, cash is outside
seizure powers under Section 67(2).
2. Time-Lapse
for Confiscation Proceedings:
o Section
67(7) requires that if no notice is issued within six months for seized goods,
they must be returned. No such notice was issued for silver bars.
3. Ejusdem
Generis Interpretation of “Things”:
o “Things”
should take colour from “documents” and “books” and refer only to items
containing information useful for proceedings—not valuable assets.
4. Supreme
Court Precedent:
o Relied
on I.J. Rao v. Bibhuti Bhushan Bagh (1989) 3 SCC 202—failure to issue
notice within prescribed period makes seizure invalid.
Respondents’
(Revenue) Arguments
1. Broad
Interpretation of ‘Things’:
o Claimed
silver bars and cash were seized as “things” under Section 67(2), not “goods.”
2. Silver
Bars as Securities:
o Argued
that silver bars fell within “securities” excluded from “goods,” thus
permitting seizure as “things.”
3. Support
from Case Law:
o Relied
on Kanishka Matta v. Union of India (2020, MP High Court), which held
that “things” includes money.
Court’s
Findings
1. Interpretation
of Section 67:
o Purpose: Section
67 is an investigatory provision to detect tax evasion—not for tax recovery or
seizure of unaccounted wealth.
o Goods:
Only goods liable for confiscation can be seized. Silver bars, being movable
property and not “securities,” qualify as “goods” under Section 2(52).
o Things:
Must be read ejusdem generis with “documents” and “books” to mean items
containing information relevant to proceedings—e.g., pen drives, hard drives,
mobile devices—not generic valuable assets.
2. Cash
and Silver Bars Not Linked to Proceedings:
o No
evidence showed the seized items were directly linked to any taxable supply or
fake invoice transaction.
o Revenue
conceded no material connected the seized silver or cash to any specific GST
violation.
3. Six-Month
Rule Under Section 67(7):
o No
confiscation notice was issued within six months; hence, seized goods must be
returned.
o Even
if seizure of cash/silver were assumed valid, Section 67(3) requires return if
items are not relied upon in proceedings.
4. Rejection
of Revenue’s Interpretation:
o The
Court disagreed with the Kanishka Matta approach, stressing that search
and seizure powers must be narrowly construed to protect taxpayer rights.
5. Distinction
from Income Tax Powers:
o Seizure
of unaccounted wealth is within the Income Tax Act’s domain, not GST law.
Judgment
- The writ petition was allowed.
- The Delhi High Court directed the immediate
release of cash and silver bars seized on 28 January 2020.
- Clarified: Authorities may still
pursue other lawful proceedings under GST, but cannot retain assets seized
unlawfully.
Key Legal
Principles Evolved
1. Narrow
Scope of “Things” in Section 67:
o Must
be relevant to proceedings, not merely valuable assets.
2. Time-bound
Seizure Validity:
o Goods
must be returned if no notice under Section 67(7) is issued within six months.
3. Seizure
Powers Not for Recovery or Unaccounted Wealth:
o GST
search and seizure aim to detect tax evasion, not serve as a parallel income
tax mechanism.
4. Silver
Bars Are “Goods,” Not “Securities”:
o Movable
assets like silver are taxable goods unless specifically excluded.
Conclusion
This case reinforces
judicial safeguards against overreach in GST search and seizure operations. The
judgment underscores that officers cannot seize cash or valuable assets under
GST merely because they appear unaccounted for—there must be a clear nexus to
taxable supplies or evidentiary relevance in GST proceedings. It also stresses
the importance of statutory timelines for issuing confiscation notices and
returning seized property, strengthening taxpayers’ procedural rights
Disclaimer: All the Information is based on the notification, circular advisory and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.
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